Verizon Rebuffed on Retention

2/14/2009 2:00 AM Eastern

By: John Eggerton

The U.S. Court of Appeals for the D.C. Circuit has upheld the Federal Communications Commission's order for Verizon to stop using information gathered as a result of consumers switching from a phone provider to cable to try to retain that customer with added incentives.

That's a win for cable operators that complained Verizon was improperly taking advantage of that knowledge.

Cable operators and phone companies must notify each other about the migration of a phone customer for purposes of “porting” the old number. Comcast, Time Warner Cable and Bright House Networks complained to the FCC that Verizon's attempts to retain customers at that juncture violated Telecommunications Act restrictions on a carrier's use of proprietary information for marketing purposes.

The FCC's Enforcement Bureau initially found in favor of Verizon, in April 2008. The full commission later overruled that decision, in a 4-1 vote, with only then-chairman Kevin Martin sticking with the original decision.

Verizon made it a legal matter, but the court on Feb. 10 said the FCC's interpretation was reasonable and denied Verizon's challenge.

Sena Fitzmaurice, Comcast senior director corporate communications and government affairs, said the company was “pleased that the court reaffirmed the FCC decision that Verizon's practices were illegal and harmful to consumers and competition. Today's ruling is a win for consumers who are saving billions of dollars a year because of the entry of cable companies into the local phone business. The decision will allow competition to continue to develop and ensure that consumers who choose to leave their incumbent phone provider will have their wishes respected.”

Verizon spokesman David Fish said the company was reviewing the order.

“This looks like a loss for consumers, who now will have less information available when choosing between different competitors,” Fish said. “By denying consumers information, the FCC's order denies them choice.”

The FCC's Enforcement Bureau in its April 2008 ruling said it would not step in to prevent Verizon from using proprietary information to try to keep customers from switching to cable-phone service — so-called retention-marketing efforts. The bureau concluded that the rules were unclear, but it favored Verizon's reading of them, allowing the methods used — including various incentives — to try to retain those customers.

FCC commissioner Robert McDowell, though argued that phone carriers were free to try to retain customers before they make the decision to switch to cable or some other provider. “Under the law, carriers are also permitted to launch 'win-back' campaigns after consumers have switched,” McDowell noted.